Rubber glove stocks rise on weakening ringgit, positive prospects

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KUALA LUMPUR (Aug 3): Rubber glove stocks were on the rise during the morning trading session, as investors capitalised on export-oriented stocks after the ringgit touched its 16-year low on July 31 against the greenback.

At 11.12am, Supermax Corp Bhd (fundamental: 1.0; valuation: 0.8) gained 5 sen or 2% to RM2.51, with some 9.2 million shares exchanged. The counter earlier rose as much as 21 sen or 8.5% to reach a high of RM2.67.

Top Glove Corp Bhd (fundamental: 2.5; valuation: 1.1) rose 8 sen or 1.1% to RM7.70, with 333,300 shares exchanged, and had earlier gained 14 sen or 1.8%, touching a high of RM7.76.

JF Apex Securities Bhd analyst Jessica Low said the weakened ringgit coupled with the positive prospects on rubber glove players has supported the gains in the counters today.

“The weakened ringgit has definitely supported the rise in rubber glove stocks today. Besides that, the positive prospects on the sector is also a factor, as demand for rubber gloves is stabilising, thus lessening worries of a supply glut,” she told theedgemarkets.com.

She added that the price of natural rubber latex is also lower, translating to lower raw material costs for rubber glove companies.

Meanwhile, another analyst noted that rubber glove stocks have been benefiting from the weakening ringgit since the start of 2015.

“Stocks like Supermax and Top Glove have been on the rise since earlier this year when, the ringgit started to weaken against the US dollar,” he said.

However, he said that the rise in share prices today is not just due to foreign exchange reasons, but added that it may have more to do with the brighter prospects for rubber glove stocks going forward.

“Some research houses have upgraded their ratings on some of the rubber glove stocks, so that could have more impact on the share prices of these stocks,” said the analyst.

The ringgit touched its 16-year intraday low of RM3.8405 against the US dollar on July 31, as uncertainties surrounding Malaysia’s political environment weighed on investor’s sentiment that is already flagging from the protracted slump in crude oil prices.

According to Bloomberg data, the ringgit was trading at RM3.8345 against the greenback, while Brent Crude and West Texas Intermediate (WTI) Crude Oil indices fell 0.68% and 0.73% to US$51.83 and US$46.80 respectively.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)